Job Market Signaling Equilibria with Unobserved Cost Functions and Higher Education Reforms

The paper examines job market signaling equilibria in the presence of perturbations coming from policy reforms and unobserved individuals' cost functions. We show that when the single-crossing property is preserved, in the one shot version of the game the basic Spence' result of separation always holds. Then we show that in the repeated version of the game both separating and pooling equilibria may arise conditional on the intensity of educational policy reforms. In this case, a frequent implementation of higher education reforms may be crucial in generating pooling equilibria.